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April 28, 2020

Memorandum: COVID-19 Impact on Stop Loss Coverage

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Updated Tuesday, April 28, 2020

Memorandum: COVID-19 Information on Stop Loss Coverage

Many employers are facing choices about how to handle their workforce and health benefits during the spread of COVID-19. The stop loss contract provides for the right to rerate if the census changes by more than 10% or there is a change in benefits. In light of the current, unprecedented situation, please take note of stop loss implications for the following scenarios.

NO rerate will occur:

(1) If the employer waives member responsibility for COVID-19 testing.

(2) If the employer waives member responsibility for telemedicine services related to COVID-19.

(3) If the employer waives member responsibility* for all telemedicine services (not just COVID-19 related services), as long as:

  • The benefit change is documented in writing and a plan amendment is adopted when possible; and 
  • The benefit change is rescinded no later than July 1, 2020.

(4) If the employer allows mid-prescription refills, as long as:

  • The refill is no more than 90 days;
  • This allowance is withdrawn after July 1, 2020; and
  • There is a Roundstone stop loss contract in effect on July 1, 2020.

(5) If the employer waives prior authorization for COVID-19 related testing and treatment.

(6) If the employer lays off a portion of its work force but chooses to continue health benefits for those laid off employees, as long as:

  • At least one employee on the health plan remains actively at work (this can be the owner);
  • Health benefits are offered to all laid off employees on the same terms; 
  • Employer continue to pay stop loss premium on all covered individuals;
  • Employer’s TPA continues to administer the benefit plan and claims continue to be paid; and
  • The census returns to within 10% of current by July 1, 2020.

(7) If the employer lays off a portion of their work force but does NOT offer to continue health benefits, as long as:

  • At least one employee remains on the health plan and actively at work (this can be the owner);
  • COBRA coverage is offered as required by applicable law;
  • Only employees properly electing COBRA remain on the plan;
  • Premiums are continued to be paid on all covered individuals; and
  • The census returns to within 10% of current by June 1, 2020.

If no employees on the plan remain actively at work, then the plan itself is considered terminated. In that case, the stop loss contract will terminate effective the date the last covered employee is no longer actively at work.

If any of the benefit or census changes outlined above are made without all the corresponding conditions, the case will be reviewed to determine if a rate change is necessary to avoid adverse selection and protect the interests of the captive participants. Roundstone’s goal is to work with employers to avoid revising rates during this time.       

Stop loss premiums are due on the first day of each month and the stop loss contract provides a 30-day grace period. For the months of March, April, and May, this will be extended an additional 30 days.

* The status of a High Deductible Health Plan (HDHP) may be jeopardized if the plan provides telemedicine services with no member responsibility. The IRS recently provided guidance that waiving member responsibility for telemedicine services related to COVID-19 will not jeopardize the status of a HDHP. Roundstone does not recommend waiving member responsibility for non-COVID-19 telemedicine services on HDHP’s until the IRS provides further guidance. However, the position outlined above will apply if the employer chooses to do so.

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